Thus, having been born without the law, Bangladesh offered a better environment for manufacturing firms to achieve economies of scale and create a large number of jobs. And though Bangladesh still needs much stronger regulation to protect workers from occupational hazards, the absence of a law that explicitly curtails labor-market flexibility has been a boon for job creation and manufacturing success.
Bangladesh is no exception. A reversal of those investments would cause a severe and prolonged economic setback. This is not merely a passing concern: vibrant economies have been derailed by zealotry many times throughout history. For example, a thousand years ago, the Arab caliphates ruled over regions of great economic dynamism, and cities like Damascus and Baghdad were global hubs of culture, research, and innovation.
That golden era ended when religious fundamentalism took root and began to spread. Since then, a nostalgic pride in the past has substituted for bold new pursuits in the present. And it was no coincidence that during this time, cities like Lahore were multicultural centers of art and literature. But then came military rule, restrictions on individual freedom, and Islamic fundamentalist groups erecting walls against openness.
By , India surpassed Pakistan in terms of per capita income, and it has since gained a substantial lead. But this is not about any particular religion. Today, Hindu fundamentalist groups that discriminate against minorities and women, and that are working to thwart scientific research and higher education, are threatening its gains. Bangladesh has an impressive track record of growth and poverty reduction.
It has been among the fastest growing economies in the world over the past decade, supported by a demographic dividend, strong ready-made garment RMG exports, and stable macroeconomic conditions. Continued recovery in exports and consumption will help growth rates pick up to 6.
Bangladesh tells the world a remarkable story of poverty reduction and development. From being one of the poorest nations at birth in with per capita GDP tenth lowest in the world, Bangladesh reached lower-middle-income status in Poverty declined from Moreover, human development outcomes improved along many dimensions.
Bangladesh, like other countries, faces the daunting challenge of fully recovering from the COVID pandemic which has constrained economic activities and reversed some of the gains achieved in the last decade. The pace of poverty reduction slowed down, exports declined, inequality increased across several dimensions and the poverty rate in increased to Nevertheless, strong remittance inflows and a rebound in export market has helped the economy to start recovering gradually.
To recover fully and achieve its growth ambitions of achieving upper-middle income status, Bangladesh needs to address the challenge of containing COVID Vaccinating the population will reduce the incidence of the disease and mortality and enable the full resumption of economic activities. Other development priorities include diversifying exports beyond the RMG sector; deepening the financial sector; making urbanization more sustainable and strengthening public institutions.
Addressing infrastructure gaps would accelerate growth and reduce spatial disparities in opportunities across regions and within cities.
Addressing vulnerability to climate change and natural disasters will help Bangladesh to continue to build resilience to future shocks. Pivoting towards green growth would support the sustainability of development outcomes for the next generation. Currently, Bangladesh is among the largest IDA recipient country. The World Bank has also been the largest external funder of Bangladesh providing over a quarter of all foreign aid to the country.
Through a robust program of technical, analytical, and financial support, the World Bank Group is supporting Bangladesh towards its vision of becoming an upper-middle income country by the next decade. This includes government efforts in economic development and growth, power, infrastructure, disaster management, climate change, human and social development, and poverty reduction.
The three focus areas are: 1 growth and competitiveness; 2 social inclusion; and 3 climate and environment management. It adjusted to respond to the challenges created by the influx of the displaced Rohingya population, and recommended greater attention to human capital, climate resilience, and digital transformation. The financing helped Bangladesh ramp up COVID testing and strengthen treatment through ensuring supplies of critical items like ventilators, oxygen concentrators, ICU beds, high flow oxygen cannula, and personal protective equipment as well as work for setting up liquid medical oxygen systems at 30 public facilities is ongoing.
IDA is the largest external funder in the education sector covering the primary, secondary, and tertiary levels, as well as technical and vocational education and training, and education for the hard-to-reach children. Bangladesh has made remarkable gains in ensuring access to education in the past two decades. With nearly 9. Improving the quality of education remains the largest challenge for Bangladesh at all levels.
Yet due to drop out rates, around 18 percent of children ages remain out of school — either having never enrolled or dropped out before completing grade 5. The Skills and Training Enhancement Project STEP helped to strengthen and improve the quality of skills training and employability of youth, both at home and abroad.
Around, , graduates have completed programs in polytechnic institutions. The World Bank is supporting the government respond to the COVID impact and build back a better and resilient education system through new and existing operations. Second, the experience of Korea and other East Asian economies demonstrated the need for early diversification into higher-value manufacturers. All these countries began their ascent up the income ladder by producing light manufactures but then quickly branched out into complex products.
That sort of structural transformation now looks forbiddingly difficult for an LDC, even Bangladesh. There are technological barriers to entry, high-value GVCs are harder to integrate with for newcomers, manufacturing is automating and becoming servitized, and the share of manufacturing in GDP and its contribution to growth is diminishing. Third, Vietnam, the only country that appears to be following the East Asian playbook, highlights the importance of foreign direct investment FDI in firmly placing a country on the path to rapid and sustainable growth.
It would seem highly desirable for countries that are ambitious and entrepreneurial to pull out the stops—fiscal and otherwise—to attract FDI that could accelerate the process of diversification.
Fourth, homegrown, high-growth conglomerates can complement the push administered by multinational corporations. Korean chaebol carpentered the Korean miracle, Taiwanese contract manufacturers have undergirded its prosperity, and Vietnamese conglomerates are contributing to industrial diversification.
Last but not least, the only sure way to escape from the lower-middle-income trap is to by raising factor productivity year after year. In addition to the above measures, countries need to improve the quality of human capital. Years of schooling without much learning do not suffice. A deepening of technical and managerial skills would enhance the productivity gains from digital technology.
Moreover, private entrepreneurship and investment are inseparable from growth that is productivity-led. This is more likely to be forthcoming where there is stable and predictable policy environment, a firm commitment to openness and to growth, and where the grasping hand of the state is credibly checked by political and legal institutions. CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise.
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